Saturday Gold and Silver

Sat, Mar 2, 2013 - 12:47pm

It looks more and more like the next two weeks or so are going to be significant.

So, where do we start on this fine Saturday? How about with something from Friday? I posted these two charts into the comments section of yesterday's post. They show a classic short/theft tactic. Someone, either an HFT or a Cartel monkey, pulled the trigger on a sell order in silver at the very thin trading hour of 4:00 a.m., New York time. Since silver was sitting right on top of the previous week's lows, the effect was predictable. A host of sell-stops were "harvested" as price quickly fell about 50¢. Note then that price quickly recovered as liquidity returned with the opening of the Comex session.

Why did I start there today, you ask?

  1. Because now $28.40 is a very important level to watch early next week in silver, and,
  2. It is becoming increasingly likely that the same trick is going to get played out on a much larger scale in both gold and silver before a final bottom is put in and price permanently reverses.

Let's next visit our three friends...Crude, DrC and Sylvia. Do they have any clues for us? Why, yes, they do as a matter of fact. All three have come down dramatically and all three give the appearance of having a bit further to go. And if "commodities in general" show additional weakness over the next 7-10 days, you can probably imagine that selling pressure compounding our problems in gold and silver.

So let's start with silver. Running the stops yesterday has fortunately provided us with a very clear level to watch at $28.40. If silver slips below there again early next week, it would be a near certainty that we are going to take at least one trip down below $28. There has consistently been a lot of support there so taking it much lower is going to be a task for The Bad Guys.

That said, I'm beginning to sense that the ultimate goal of this entire event is to harvest the stops below $26. IF this happens...and currently I'd put the odds at about 25%...a quick drop to $25ish would be your final bottom. Price would quickly recover back above $26 and this deliberate beatdown would be over. How can I say that? More on that in a few minutes. First, two more charts:

And gold could very easily suffer the same fate. If The Cartel can engender enough additional spec selling, a veritable cornucopia of sell stops lay waiting for them sub-1530. And you can just imagine the reaction in the media: "GOLD IN BEAR MARKET!!" will be screamed as loudly as possible in the hopes of inspiring even more selling. Like silver, I only give this about 1 chance in 4 of happening but we must be on the lookout and prepare mentally. IF this occurs, you must be strong and BUY, not sell. The spike low will be The Bottom.

Now lets get back to why I am so confident that the selling has already been stretched to unsustainable levels and why, IF a spike low occurs, the metals would quickly recover. It's all in the CoT.

Yes I know that Santa claimed this week that the CoT is fudged and unreliable and yes I know that Santa has forgotten more about the metals markets that I know.....but....Unlce Ted believes in this stuff and so do I. Here's what Ted said in his mid-week newsletter:

"One of the reasons I think the data in the COT are accurate is that every contract has a long and short side. Therefore, to lie in the large trader reporting system that underlies the compilation of the COT, would require two lies; one by the big commercial lying and another by the counterparty holding the opposite side of the contract. I can see JPMorgan wanting to lie on its COMEX holdings, but I can’t see why a counterparty tech fund or speculator would assist in that lie. Please remember that lying on a large trader report is illegal and will be prosecuted by the CFTC (one of the few things they do well)."

With this in mind, here's a c&p of my CoT comments from yesterday:

For the Wed-Tue reporting week, gold was up $10 but total OI fell by 13,432. Silver fell by 17¢ and OI fell by 9,728.
The only interesting thing in the gold CoT was the divergence between LargeSpecs and SmallSpecs. The LargeSpecs went net long 13,000 contracts while the small specs went net short 7,400. This, my friends, is called leading the HFTs by their collective noses. On the bounce, the LargeSpecs covered shorts and went long to the tune of 13,000 contracts. Once fleeced, the "market" rolled back over and now all of those new longs (at 1600+) are under water.
Once again, the real interesting stuff is in silver. Both the Large and Small specs were adding to their shorts. The Large Specs sold a net 4,700 contracts and the Smalls sold a net 2,300. The commercials also sold 1,700 longs, dropping their gross long position back to a still-whopping 52,509. All of this selling allowed the naked short Cartel members to cover a massive 8,769 shorts or about 9% of their total gross short position! Now at 83,395, The Silver Cartel has been able to trim their short position by over 15,500 contracts, from 98,979 just two weeks ago. That's a drop of 16% in two weeks while price fell $2 from $31 to $29. I'm sure that's just good timing and good least that's what Cueball and Thunderlips think.

On the bright side...

  • The total "commercial" long position in silver is actually up over the past two weeks while JPM et al have been covering. On 2/12/13, the gross comm long position was 52,182. As stated above, as of 2/26, it was still 52,509.
  • The Large Specs are racing to get short. On 2/5/13, the Large Specs were only short a record low 6,588 contracts. Three short weeks later, they're short a total 16,016, an increase of 143%!
  • The Large Specs are also feverishly dumping longs. Three weeks ago they were gross long 42,449. As f last Tuesday, that position had been whittled down to 37,753. That's a drop of 11%.
  • And the Large Spec net long ratio, which just 3 weeks ago was totally out of whack at 6.44:1, has fallen all the way back to 2.38:1. Remember, as a general rule, anything under 3 is somewhat bullish and anything over 4 is somewhat bearish. Anything under 2:1 is extremely bullish. For examples, see here:
  • Also, all that Cartel short covering has further dropped the Cartel net short ratio. Last week it was 1.70:1 and this week it is 1.59:1. Again, historically, anything approaching 3:1 is very bad. Anything near 1.5:1 is very good.

I don't know if I can pound the table much harder. Could price be forced even lower, taking out $28 and heading toward $26? Yes, of course it can. But, if it does, the silver market will reach and surpass the exact same extremes that indicated bottoms in October of 2011, December of 2011 and August of 2012.

Again, please go back and looks at the "Strange Days Indeed" post from three weeks ago. ( The data is compelling and telling. Both metals, when measured by The Cartel net short ratio, have reached very bullish levels and stop-running spike lows would make them more extremely bullish than any other time that I can recall. Simply put, with CoT history as a guide, there is NO WAY that gold is going to $1200 and silver to $18 or even $22. Not from this CoT structure!

Moving on...Speaking of the CoT, one of your fellow Turdites has constructed a site to help everyone read and interpret the data. It can be found here:

As you know, Santa's company TRX is an advertiser on this site. Someday soon, the miners will turn and I have great faith in Santa and his company for the long term. Last week, they held their annual shareholder meeting and the entire thing was recorded and posted. Here's a link. I think you'll enjoy watching it:

And you've probably noticed that we've had to add a captcha to the registration and login process here. Sorry but it was necessary. If you've never run a site before, you simply wouldn't believe the amount and intensity of the spamming effort out there. They really slow site performance so it is hoped that the captcha will help us all in enjoying and learning from the site.

OK, that's it for now. Enjoy your weekend but please be aware of continued volatility next week and do not allow yourself to get all freaked out by the temporary price action. Keep your wits about you and remember the fundamentals. Stay strong and keep the faith. Continue to prepare accordingly.


p.s. Adding these ZH links which were posted Saturday afternoon. Don't want you to miss this: AND YOU MUST READ THIS:

About the Author

turd [at] tfmetalsreport [dot] com ()


Mar 2, 2013 - 5:14pm

Chris and Alasdair

Alasdair Macleod: Europe is in Worse Shape Than Everyone Thinks
Mar 2, 2013 - 5:19pm

heyJoe RE: Au to $$$ ratio...

Its an interesting subject and by coincidence I read a bit about it a few weeks ago...

(If my memory is correct) before 1933 every $20 dollar bill that was in circulation was redeemable in physical gold 1 for 1 and that ratio was painstakingly adhered to by the treasury. Since the US's available currency float was limited by its Gold holdings currency expansion was limited by fresh Gold acquisitions either through mining, trade, or theft (war). Thereafter post 1933 US has fractional reserve and the generally accepted historic Gold to fiat currency ratio is 15% Gold being the truest tier one capital. Since the other levels in the capital pyramid structure could be suspect in value or fluxuate maintaining this unadulterated anchor to your currency is important for a solid physiological (good faith) fiat system.

I believe (but dont hold me to this) the US ratio of Gold to dollars M2 including available electronic dollars is between 6-7%.

Anyone: Please feel free to correct me or add your knowledge...

Mar 2, 2013 - 5:32pm

Phyz vs. Paper

Hedging Funds And Physical Vs Paper Gold Submitted by Tyler Durden on 03/02/2013 13:00 -0500

Its been three long years for the 'net' speculative futures, options, and ETF holders of gold who have been reducing their exposure to the precious metal. Three long years of hearing day after day that "gold's day is done" or some other perspective that stands in the face of reckless government deficit expansion and morose monetization by all the world's central banks. Three long years and hedgies are the least exposed in years to GLD. Three long years because, as the chart below shows extremely clearly, they simply don't appear to count at the margin. The total disconnect as paper gold positioning - ETF holdings and net futures/options speculative positioning - has had no correlation with the price of Gold since August 2010 when the world started anticipating QE2 (and beyond).

Is this the indication of counterparty fears we have discussed? Or Santelli's correct comprehension of what you end up with in a crisis if you hold paper gold?

With global central banks expanding their balance sheets and many governments still increasing their gold holdings, perhaps this is the clearest indication of a rotation from paper gold to physical we can see - even as prices fall in the short-term 'strange divergence' from demand.

Furthermore, it appears the current slowdown is similar to each of the past surges post major Fed action... (S&P[green] versus Gold[orange] since QE2)

...and arguably, as central bank balance sheets remain bloated (though in the short-term thanks to LTRO repayment the gross USD-based balance is fading marginally) - the fact that the Fed has promised QE4EVA implies the ever-expanding growth of fiat will support gold prices implicitly.

It appears gold has front-run Central Bank exuberance a few times since QE2 - and each time pulled back before embarking on its inexorable rise higher. With the Fed alone adding $1tn this year and China yet to report up-to-date data for January and February, we suspect the 'green' line will start dragging the 'black' line higher once again - especially with European risks flaring once again and the desire to repay LTRO funds wearing off.

Charts: Bloomberg

UK Silverstackers
Mar 2, 2013 - 5:34pm

Manipulated COT

I think if they can manipulate LIBOR, employment and inflation details, the COT and every other Gov report shouldnt be a problem to manipulate either.

As you say across the pond, just my 2c.......

Southern Cross
Mar 2, 2013 - 5:45pm

Update on Curbside Shopping For Those Who Need Extra Cash

Here's the update on curbside shopping twice a week through community trash for the last 5 months. This is my 13 year old sons project.

To date:

$1300.00 in scrap metal sold.

$ 2600.00 sold in one garage sale.

$1000.00-1400.00 in products inventoried still for sale in the next garage sale or craigs list.

$2000.00 roughly kept by my son for his own use.

$250.00 roughly in gold circuit boards from electronics to be sold.

Total value to date - $6150.00 from thrown out trash. If you are looking for extra cash, This might be a way for you to stack some extra silver, gold, guns, or grub. My 13 year old son and I spend about 4-6 hours a week cruisng communities each week for valuable items and scrap metal. Expenses are about $20.00 a week for gas.

$7150.00 for 20 weeks equals gross income of $350.00 a week after gas expense.

Last week we found $500.00, 14 foot canoe, that needs a little love resurfacing the bottom in two spots and a Star Bucks expresso machine that retails for $1,000 in decent condition. Both of these items he kept for himself.

Hope this helps some to keep stacking. God bless each of you. Happy shopping. It's all free.

SheetrockerSouthern Cross
Mar 2, 2013 - 5:54pm


What a great project for your son! He's making money, learning to run a business and learning how to spot opportunities. By the time he's grown that boy should be easily able to take care of himself and be ahead of 98% of his peers.

Mar 2, 2013 - 5:55pm

@Be Prepared

You got the captions the wrong way round.

Mar 2, 2013 - 5:56pm

to put the miner's beat-down in perspective

I present this chart. The continuous selling without coming up for air beats even the 2008 panic.

Mar 2, 2013 - 6:01pm

Turd, I had to try 3 times to get that math question

Could you make it easier? HAha

its looking like the seasonal chart is playing out.

how does the rising dollar , which is looking stronger every day going to effect the metals?

Mar 2, 2013 - 6:03pm

The dollar...

...has put PMs right back in the mud IMHO. Blame Tokyo, London and Rome. The hedge funds who are still net long are surely running out of reasons to be so. They aren't going to cover shorts in this kind of atmosphere surely?

Factor Commentary rating Total
Technical Dollar no longer looking looking toppy thanks to Britain Europe and Japan. Pattern remains higher lows on PMs -40 -65
Sentiment In the toilet outside the hard core bugs. No sign of inflation. -75
Fundamentals QE and US debt. Recovery implausible. Equities looking toppy maybe.But fiscal deflation front and centre for now in Washington. 30
Manipulation Don't think JPM can push much more without diminishing returns. Bernanke can't do much more. 40
Opportunism Hedge funds shorting. They're still net long and longer this goes on, more bearish they become. -20

BtwI enjoyed Andrew Maguire's podcast, but in the absence of evidence to support his many claims, I am obliged to treat them as a work of fiction. No offense meant. I hope he can produce hard facts. The idea that Gordon Brown bailed out the bullion banks in such a fashion is intriguing.

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